آموزش تئوری مالی سطح قیمت: بعضی از نتایج سیاست مدیریت بدهی

This paper examines the consequences of the scale and composition of the public debt in policy regimes in which monetary policy is ‘passive’ and fiscal policy ‘active’. This configuration of policy is argued to be of both historical and contemporary interest, in economies such as the US and Japan. It is shown that higher average levels and moderate average maturities of debt can induce macroeconomic instability for a range of policies specified as simple rules. However, interest-rate pegs combined with active fiscal policies almost always ensure macroeconomic stability. This suggests that in periods where the zero lower bound on nominal interest rates is a relevant constraint on policy design, a switch in fiscal regime is desirable.

The conventional characterization of stabilization policy is that monetary policy stabilizes inflation while fiscal policy stabilizes debt through an appropriate adjustment in current or future taxation. The resulting equilibrium is Ricardian, so that debt-management policy has no monetary consequences. In the language of Leeper (1991) monetary policy is ‘active’ and fiscal policy is ‘passive’. The appropriateness of this view as a general description of policy can certainly be questioned. Both recent events and certain historical episodes adduce evidence. In response to the US financial crisis 2007–2009 many economies have found monetary policy constrained by the zero lower bound on nominal interest rates. At the same time, there has been substantial fiscal stimulus that, at least initially, was provided without overt concern for the consequences of the level of the public debt. This policy configuration can reasonably be characterized as an interest-rate peg combined with an exogenous fiscal surplus. Here monetary policy is ‘passive’, fiscal policy ‘active’, and the resulting equilibrium non-Ricardian – debt-management policy has monetary consequences. Outside this recent episode, there is evidence of changing configurations of policy regime in the US in the post-war period that include passive monetary policy and active fiscal policy – see Davig and Leeper (2006). During the 1940s, a special case of this policy configuration was actively pursued. Called a ‘bond-price support’ regime, interest rates on short-term treasury bills were pegged, with fiscal policy assuming the role of active stabilization. Woodford (2001) argues that inflation data from this period are consistent with the fiscal theory of the price level. Outside the US, the Japanese economy has clearly experienced a prolonged period of low interest rates since the mid 1990s, with frequent attempts to spur economic activity through fiscal stimulus. Again, this experience seems better characterized by a policy regime with passive monetary and active fiscal policy.1 And even if such depictions of policy are deemed inappropriate, it is not implausible to think households and firms may entertain policy configurations of this kind. Indeed, Bianchi, 2010 and Sims, 2011 demonstrate that even if agents only maintain the possibility of an alternative regime in expectation, without that regime ever occurring, there can be important implications for dynamics. As well-known from Sargent and Wallace (1975), passive fiscal policy combined with an interest-rate peg delivers indeterminacy of rational-expectations equilibrium. Periods in which nominal interest-rate policy is constrained by the zero lower bound might be periods in which expectations are particularly susceptible to drift. As such it is worth exploring the stabilization consequences of this kind of policy regime. To this end we consider a standard New Keynesian model of the kind frequently used for monetary policy evaluation, in which agents have incomplete knowledge about the structure of the economy. Incomplete knowledge is introduced to capture uncertainty about the prevailing policy regime, a characteristic of recent policy responses during the US financial crisis, particularly given the substantial uncertainty about the scale, scope and duration of various fiscal policy initiatives. Households and firms are optimizing, have a completely specified belief system, but do not know the equilibrium mapping between observed state variables and market clearing prices. By extrapolating from historical patterns in observed data they approximate this mapping to forecast exogenous variables relevant to their decision problems, such as prices and policy variables. Because agents must learn from historical data, beliefs need not be consistent with the objective probabilities implied by the economic model. The analysis is centrally concerned with conditions under which agents can learn the underlying rational expectations equilibrium of the model. Such convergence is referred to as “expectations stabilization” or “stable expectations”. A situation of unstable expectations is referred to as expectations-driven instability. In this environment we study the stability properties of various configurations of monetary and fiscal policy, specified as simple rules. Monetary policy is given by a Taylor-type rule for the conduct of nominal interest-rate policy as a function of some measure of inflation. Fiscal policy is given by a simple rule for the adjustment of the structural surplus in response to outstanding government liabilities. Given this policy framework, the analysis is interested in the role of the scale and composition of debt. In contrast to a rational-expectations analysis of the model, these characteristics of fiscal policy have important implications for stabilization policy under learning dynamics. We show that the average maturity of debt can constrain the set of monetary and fiscal policies that are consistent with expectations stabilization. The source of instability derives from three model features. First, a monetary policy rule that responds to inflation, despite being ‘passive’. Second, a positive steady-state debt level so that variations in government liabilities have first-order effects on consumption. Third, the average duration of debt is greater than one period, so that variations in the price of bonds affect the size of public debt. These effects combine so that moderate maturities of debt generate instability by making debt issuance more volatile when inflation expectations shift. On the one hand, in the neighborhood of rational expectations equilibrium, the price of the public debt portfolio becomes more sensitive to inflation expectations the greater the average duration of debt. This makes bond issuance more sensitive to a given shift in inflation expectations, because the quantity of issued debt depends on this price. On the other hand, as the average maturity rises, the amount of debt rolled over in any given period declines – changed bond prices pertain to a smaller fraction of issued debt. The former price effect tends to amplify, and the latter portfolio effect, dampen, the effect of inflation expectations on the evolution of debt. The net effects generate instability in aggregate demand as holdings of the public debt are perceived as net wealth. And these effects are largest for short to medium maturity debt. The dependency of this basic insight on various parametric assumptions is explored in detail. A specific policy recommendation that emerges is that monetary policy should be conducted according to an interest-rate peg. While an analytic result is not feasible, extensive numerical analysis reveals that for all relevant regions of the parameter space, interest-rate pegs deliver stability under learning dynamics. This result holds regardless of the scale and composition of debt. Because active fiscal policy coupled with an interest-rate peg successfully stabilizes expectations, switching to an active fiscal policy rule when the interest rate is at the zero lower bound can be an effective policy option to prevent a deflationary spiral. There are two caveats to this recommendation. First, the stability analysis has only local validity; that is the stability results hold provided agents’ expectations are sufficiently close to rational expectations. A switch from a Ricardian regime with active monetary policy to an active fiscal regime coupled with an interest-rate peg requires a significant adjustment in public expectations. The success of such a policy is likely determined by the communication strategy followed by the monetary and fiscal authority, and their credibility in following announced plans. Second, we focus on rational expectations equilibria where the policy regime remains in place indefinitely. As documented in Davig and Leeper (2006) for the US, policy regime switches are the norm. A switch to an active fiscal regime in response to hitting the zero lower bound would likely be temporary in nature. An extension of the stability analysis to regime switches is left for further research.2 The paper proceeds as follows. Section 2 lays out the model. Section 3 describes belief structure underpinning the assumed learning dynamics. Section 4 states some benchmark properties of the model for which analytical results are available. Section 5 provides benchmark parameter assumptions. Section 6 gives results for an interest-rate rule that responds to contemporaneous inflation. Section 7 gives analogous results for a forecast-based instrument rule. Section 8 explores the robustness of conclusions to variations in the assumed belief structure. Section 9 explores the robustness of conclusions to an alternative model of decision making. Section 10 concludes.

This paper applied the framework developed in Eusepi and Preston (2011) to examine the consequences of the scale and composition of the public debt in policy regimes in which monetary policy is ‘passive’ and fiscal policy ‘active’. This configuration of policy is argued to be of both historical and contemporary interest, in economies such as the US and Japan. The central result is that higher average levels and moderate average maturities of debt can induce macroeconomic stability for a range of policies specified as simple rules. In contrast, very short and long average debt maturities are often more conducive to stability. However, regardless of the scale and composition of debt, interest-rate pegs combined with active fiscal policies almost always ensure macroeconomic stability. This suggests that in periods where the zero lower bound on nominal interest rates is a relevant constraint on policy design, a switch in fiscal regime is desirable.